Drain of wealth: Economic Impact of British Colonial Rule

Drain of Wealth: Economic Impact of British Colonial Rule

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The Drain of Wealth Theory

• The constant flow of national wealth from India to England, for which India received no adequate economic, commercial, or material return, was described by Indian national leaders and economists as the “drain” of wealth from India — this was the Drain of Wealth theory.
  • A prominent theme in nationalist economic thinking held this to be one of the most important causes of India’s poverty.
• Economic drain was an integral feature of the East India Company’s administrative and economic policies.
  • The colonial government utilised Indian resources — revenues, agriculture, and industry — not to develop India, but for Britain’s own benefit.
  • Had these resources been used within India, they could have been invested there, raising the income of the people.
  • The drain of wealth was thus interpreted as an indirect tribute extracted by imperial Britain from India, year after year.

Background

• Under the mercantilist concept, an economic drain occurs when gold and silver flow out of a country as a result of an adverse balance of trade.
  • In the 50 years before the Battle of Plassey, the East India Company had imported bullion worth £20 million into India, in order to balance its exports over imports from the country.
  • The British government adopted a series of measures to restrict or prohibit the import of Indian textiles into England.
    • Among other measures, in 1720, the British government forbade the wearing or use of Indian silks and calicoes in England, on pain of penalty to both weaver and seller.

Early Drain of Wealth

• After the Battle of Plassey, this situation reversed — the drain of wealth now took an outward direction, as England gradually acquired monopolistic control over the Indian economy.
  • The “Drain of Wealth” from India to England thus began after 1757, once the Company acquired political power, and its servants a “privileged status,” which they used to acquire wealth through dastak, dastur, nazarana, and private trade.
• Once the East India Company extended its territorial control across India, administered its territories, and gained control over surplus revenues, it enjoyed a recurring surplus, which accrued from:
  • profits from its oppressive land revenue policy;
  • profits from trade, resulting from its monopolistic control over Indian markets — the Company’s own servants earning large incomes through inland trade, while British Free Merchants made fortunes through private trade; and
  • exactions made directly by Company officials.
    • During 1757–1766, individual Englishmen received from the princes and other persons in Bengal no less than 50 million current rupees in the form of illegal presents and perquisites — a practice that continued even after the Court of Directors’ prohibition of 1766.
    • Among those charged with such conduct in the post-1766 period were Warren Hastings and his supporter in the Council, Barwell.
• Private fortunes obtained by Company servants and other Europeans in India were remitted to Europe through various means:
  • one method was sending diamonds to Europe — a practice followed by British Free Merchants as well; and
  • the other was to issue bills of exchange on the East India Company, or on any other European Company.

Responsibility of the East India Company

• For the most serious drain on Bengal’s capital, the East India Company itself bore direct responsibility.
  • First, the Company financed its “investments” from Bengal out of the province’s surplus territorial revenues, following the acquisition of Dewani (1765) — having become supreme ruler of a rich and fertile kingdom, it used these revenues partly for purposes wholly unconnected to the people of Bengal.
  • Secondly, the Company’s government in Bengal frequently provided financial assistance to the governments of Madras and Bombay, both for ordinary civil purposes and for their wars — such as the First and Second Anglo-Mysore Wars and the First Anglo-Maratha War.
  • Thirdly, the Company’s entire China trade was financed from Bengal, though the province gained nothing in return.
    • This drain took the form of the export of bullion, one pernicious effect of which was a scarcity of silver in Bengal — largely responsible for the province’s currency muddle in the second half of the 18th century.
• This entire “surplus” was used by the Company as an “investment” — that is, to purchase exportable goods in India and elsewhere — while, against these exports, India received nothing in return.
  • This is how the “Drain of Wealth” began — nothing more than a unilateral transfer of funds, and a point that early nationalist leaders made central to their economic criticism of British colonialism.
  • It affected Bengal far more than Madras and Bombay, since the incomes of these latter two Presidencies were generally less than their actual needs.

Estimating the Early Drain (1757–1780)

• Estimates of the total economic drain vary widely, since it is not possible to extract full and accurate statistics from incomplete and conflicting contemporary records.
  • According to Verelst, Governor of Bengal, in the five years following the grant of Dewani (1765), goods and bullion worth a total of £4,941,611 left the country.
  • The historian Dow wrote, around 1770, that Bengal lost annually to Europe, on account of the drain, about £1,477,500 sterling.
  • According to a modern historian, during 1757–1780, the amount drained from Bengal’s resources was about £38 million sterling on important items alone, excluding all others.

Dadabhai Naoroji’s Theory of the Drain of Wealth

• Dadabhai Naoroji was the first to argue that India’s poverty was not the result of internal factors, but was caused by colonial rule, which was draining India’s wealth and prosperity.
  • The drain of wealth was that portion of India’s wealth and economic output that remained unavailable to Indians.
• The Drain of Wealth theory was systematically initiated by Naoroji in 1867, and later further analysed and developed by R.C. Dutt, M.G. Ranade, and others.
  • In 1867, Naoroji first put forward the “drain of wealth” theory, arguing that Britain was completely draining India — a claim set out in his book, Poverty and Un-British Rule in India.
  • He argued that nearly one-fourth of the revenues raised in India left the country each year, added instead to the resources of England — and that, had this amount not been drained away, it would have been invested in India, raising the people’s income.
    • He considered this a major evil of British rule in India, remarking that, “materially,” British rule caused only “impoverishment” — comparing it to “the knife of sugar,” where “there is no oppression, it is all smooth and sweet, but it is the knife, notwithstanding.”
  • In 1880, Naoroji observed: “It is not the pitiless operations of economic laws, but it is thoughtless and pitiless action of the British policy; it is pitiless eating of India’s substance in India and further pitiless drain to England… it is pitiless perversion of Economic Laws by the sad bleeding to which India is subjected, that is destroying India.”
• Following Naoroji’s lead, R.C. Dutt promoted the same theory, making it a central theme of his book, The Economic History of India (1901).
  • He protested that taxation raised by a king is like “the moisture sucked up by the sun,” meant to return to earth as fertilising rain — but the moisture raised from Indian soil now descended as fertilising rain largely on other lands, not on India.
• M.G. Ranade published his Essay on Indian Economics in 1899, likewise addressing the drain of wealth, while stressing the need for heavy industry for economic progress and considering Western education vital to the foundation of an Indian nation.
  • Other economic critics of colonialism included G.V. Joshi, G. Subramaniya Iyer, G.K. Gokhale, and P.C. Ray.
  • John Sullivan, President of the Board of Revenue at Madras, wrote: “Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames.”
• Naoroji and other economic nationalists identified several factors contributing to the external drain, including:
  • “Home charges,” covering the Secretary of State’s establishment at the India Office in London, along with pay, pension, and training costs for civilian and military personnel — “the men who ruled India”;
  • annuities on account of railway and irrigation works, along with guaranteed interest on foreign investments in railways, irrigation, road transport, and other infrastructure;
  • India Office expenses, including pensions to retired officials who had served in India or England, and pensions for army and naval personnel;
  • remittances to England made by Europeans to their families;
  • remittances for the purchase of British goods, consumed by British employees in India — including the government’s policy of importing all its stationery from England;
  • interest on foreign debt incurred by the East India Company;
  • military expenditure; and
  • the systematic undervaluation of both trade and Indian labour.

Amount of the Drain: Nationalist Estimates

• Indian leaders’ estimates of the drain differed from person to person and year to year; the general basis of calculation was the gap between exports and imports, though other factors also entered into the reckoning.
  • R.C. Dutt observed that one-half of India’s net revenues flowed out of the country annually, estimating this at about £20 million a year in the early years of the 20th century.
  • Ranade declared that more than one-third of India’s national income was taken away by the British in one form or another.
  • By Naoroji’s calculation, this drainage amounted to about £12 million per year, while William Digby calculated it at £30 million annually — on average, this represented at least half of the total revenue income of the British Indian government.
  • Naoroji himself stated that nearly one-fourth of the revenues raised in India left the country each year, adding to England’s resources (roughly £12 million per year).
  • A modern historian would place the drainage at around £17 million per annum in the late 19th and early 20th centuries, noting that this represented “less than 2 per cent” of the value of India’s commodity exports during that period.

Impact on the Economy

• The drain theory was not limited to the narrow concept of the export of money or goods, but rested on wider economic reasoning.
  • The drain affected the country’s prospects for employment and income.
  • As R.C. Dutt pointed out, when taxes paid by the people are spent within the country, the money circulates among them, fructifying trade, industry, and agriculture, and eventually reaching the masses in one form or another — but when sent out of the country, it stimulates neither trade nor industry, nor does it reach the people in any form.
• The drain effectively denuded India of its productive capital, creating a shortage of capital that hindered industrial development — directly impoverishing India and stultifying the process of capital formation.
  • In R.C. Dutt’s view, the drain flowed mainly out of land revenue, thereby causing the impoverishment of the peasantry.
  • Naoroji argued that what was being drained away was a “potential surplus” — one that could have generated further economic development, had it been invested within India.
• Some recent historical writings note that India was, in fact, never transformed into a full-fledged capitalist economy.
  • As in the agrarian sector, so too elsewhere, British policies failed to foster growth, owing to their essentially colonial character — that is, the policy of gearing the colonial economy to the needs of the mother country’s economy.
• A revisionist view claims that, on the whole, “colonial India experienced positive economic growth,” though this growth is admitted to have varied widely across both time and space.
  • There were periods of growth (such as 1860–1920) and regions of prosperity (such as Punjab, coastal Madras, and western Uttar Pradesh), meaning a generalised account of colonial policy cannot fully explain these regional and periodic variations.
  • Where stagnation prevailed, it was largely because the government failed to invest sufficiently in resource generation — irrigation, education, and healthcare — with the revisionist view acknowledging that the presence or absence of these critical resources ultimately determined regional development, or the lack of it.

Constituents of the Drain of Wealth

Home Charges

• “Home charges” covered the Secretary of State’s establishment at the India Office in London, together with pay, pension, and training costs for civilian and military personnel — collectively, “the men who ruled India.”
• Amount of Home Charges:
  • Before the Revolt of 1857, Home charges varied between 10 and 13 per cent of India’s average revenues.
  • After the Revolt, this proportion rose sharply to 24 per cent during 1897–1901.
  • In 1901–02, Home charges amounted to £17.36 million.
  • By 1921–22, they had risen sharply to 40 per cent of the Central Government’s total revenue.
• Other constituents of Home charges included:
  • dividends paid to shareholders of the East India Company;
  • interest on public debt raised abroad — the Company had accumulated a large public debt to dislodge Indian rulers from their principalities, which had risen to £224 million by 1900; only part of this debt had been raised for productive purposes, such as railways, irrigation, and public works;
  • civil and military charges, comprising pensions and furloughs for British officers in the civil and military departments in India, expenses of the India Office establishment in London, and payments to the British War Office — charges arising solely from India’s subjection to foreign rule; and
  • store purchases in England — the Secretary of State and the Government of India procured stores for the Military, Civil, and Marine Departments in the English market, with annual expenditure on such stores ranging between 10 and 12 per cent of Home charges over 1861–1920.

Council Bills

• The actual transfer of money took place through the sale of “Council Bills” — sold in London, in sterling, to purchasers of Indian goods, who in turn received Indian rupees in exchange, a mechanism that itself constituted a drain of wealth.
  • Council Bills are best explained through Sir John Strachey’s 1888 lectures: “The Secretary of State draws bills on the Government treasury in India, and it is mainly through these bills, which are paid in India out of the public revenues, that the merchant obtains the money that he requires in India and the Secretary of State the money that he requires in England.”
  • In simpler terms:
    • prospective British purchasers of Indian exports bought Council Bills from the Secretary of State in exchange for sterling — sterling that was then used to meet the Home Charges;
    • these Council Bills were exchanged for rupees drawn from the Government of India’s revenues;
    • the rupees were then used to purchase Indian goods for export; and
    • conversely, British officials and businessmen in India bought Sterling Bills with their rupee profits from British-owned Exchange Banks, whose London branches paid pounds for such bills, using money generated from Indian exports purchased through the rupees obtained via the sale of Sterling Bills.

Interest and Profit on Foreign Capital Investments

• Interest and profits on private foreign capital constituted another significant leakage from India’s national income stream.
  • Finance capital entered the Indian market during the last quarter of the 19th century, driven by the extension of railways, growth in internal and external trade, and the establishment of plantations, mines, cotton and jute mills, and engineering works.
  • Foreign capitalists showed little interest in India’s genuine industrial development, instead exploiting Indian resources for their own benefit — often actively thwarting indigenous capitalist enterprise through fair means and foul.

Foreign Banking

• India was compelled to make huge payments for banking, insurance, and shipping services.
  • Beyond constituting a direct drain on Indian resources, the unrestricted activities of these foreign companies also stunted the growth of Indian enterprise in these very spheres.

British Response

• The British reply to these arguments was that the drain merely represented legitimate payments for services of capital and personnel.
  • The imperial argument held that some of this expenditure served to encourage economic development in India, much as it had in the West — India having been brought into the larger capitalist world market, itself seen as progress towards modernisation.
  • Much of the foreign loans and investments, it was argued, went towards developing infrastructure, integrating internal markets, and thereby modernising the Indian economy itself.
• Sir John Strachey stated in 1888 that England received nothing from India except return for English services rendered and English capital expended — the export surplus, in his view, being accounted for by invisible exports such as shipping and insurance charges on exports and imports.
  • In return for interest paid to British capital, India received railways, irrigation works, and plantation industries; in return for the Home Charges, it received the services of efficient officers and security against external aggression.
  • The substance of this argument was that the drain represented expenditure that, in various ways, benefited India and contributed to its modernisation.
• Indian nationalist thought, however, never reconciled itself to the very high price exacted by British rulers for these purported benefits.
  • British capitalists remitted to England not merely the legitimate interest on capital invested in India, but the entire amount of their profits, while British pensioners spent their pensions in England, not India.

Impact of the Drain Theory on the Growth of Economic Nationalism

• Of all the national movements in colonial countries, the Indian national movement was the most deeply and firmly rooted in an understanding of the nature and character of colonial economic domination and exploitation.
  • The Moderates — the early Congress leaders — were, in the 19th century, the first to develop a systematic economic critique of colonialism, perhaps their most important contribution to the growth of the national movement in India.
  • The themes built around this critique were later popularised on a massive scale, through popular lectures, pamphlets, newspapers, dramas, songs, and prabhat pheries, forming the very “pith and marrow” of nationalist agitation.

Disillusionment of Indian Intellectuals

• Indian intellectuals in the first half of the 19th century had adopted a broadly positive attitude towards British rule, hoping that Britain — the most advanced nation of the time — would help modernise India.
  • This is not to say early Indian nationalists were unaware of the political, psychological, and economic disabilities of foreign domination; rather, they still supported colonial rule, expecting it to rebuild India in the image of the Western metropolis.
• This process of disillusionment set in gradually after 1860, as the reality of India’s social development failed to match these hopes — progress in new directions proved slow and halting, while overall the country appeared to be regressing and underdeveloping.
  • Their image of British rule gradually took on darker hues, prompting them to probe deeper into the true nature of British rule and its impact on India.

Economic Analysis of British Rule

• Key figures in this economic analysis included:
  • Dadabhai Naoroji, “the Grand Old Man of India”;
  • Justice Mahadev Govind Ranade; and
  • Romesh Chandra Dutt, who published The Economic History of India at the start of the 20th century, examining in minute detail the entire economic record of colonial rule since 1757.
  • These three leaders, along with G.V. Joshi, G. Subramaniya Iyer, and G.K. Gokhale, subjected every aspect of the economy and colonial economic policy to close scrutiny — concluding that colonialism was the principal obstacle to India’s economic development.
• They recognised that colonialism no longer operated through the crude tools of plunder, tribute, and mercantilism, but through the more disguised and complex mechanisms of free trade and foreign capital investment.
  • The essence of 19th-century colonialism, in their view, lay in transforming India into a supplier of foodstuffs and raw materials to the metropolis, a market for metropolitan manufactures, and a field for the investment of British capital.
• The early Indian national leaders were simultaneously learners and teachers, organising powerful intellectual agitations against nearly every major official economic policy — often expressed in bold, hard-hitting, and colourful language.
  • This agitation began with the assertion that Indians were poor and growing poorer every day.
  • The early nationalists saw this poverty as man-made, and therefore capable of being explained and remedied — as R.C. Dutt put it: “If India is poor today, it is through the operation of economic causes.”
  • Poverty was, moreover, framed as a problem of national development, a framing that helped unite, rather than divide, different regions and sections of Indian society.

Industrialisation as the Main Focus of the Moderates

• Economic development was seen above all as the rapid development of modern industry.
  • The early nationalists regarded the complete economic transformation of the country, based on modern technology and capitalist enterprise, as the primary goal of their economic policies — believing industrialism represented “a superior type and a higher stage of civilization.”
  • Ranade argued that factories could “far more effectively than Schools and Colleges give a new birth to the activities of the Nation.”
• Modern industry was also seen as a major force capable of uniting the diverse peoples of India into a single national entity with common interests.
  • Surendranath Banerjea’s newspaper, The Bengalee, wrote: “The agitation for political rights may bind the various nationalities of India together for a time. The community of interests may cease when these rights are achieved. But the commercial union of the various Indian nationalities, once established, will never cease to exist. Commercial and industrial activity is, therefore, a bond of very strong union and is, therefore, a mighty factor in the formation of a great Indian union.”
• Given this whole-hearted devotion to industrialisation, the early nationalists viewed all other issues — foreign trade, railways, tariffs, currency and exchange, finance, and labour legislation — in relation to this paramount concern.
  • The early nationalists were, however, firm on one point: however great India’s need for industrialisation, it had to be built on Indian capital, not foreign capital.
    • They regarded foreign capital as an unmitigated evil, one that did not develop a country but exploited and impoverished it — or, as Naoroji put it, foreign capital represented the “despoliation” and “exploitation” of Indian resources.
    • They argued further that foreign capital, rather than encouraging Indian capital, actually replaced and suppressed it, driving a further drain of capital from India and strengthening the British hold over the Indian economy.
    • To develop a country through foreign capital, they argued, was “to barter the entire future for the petty gains of today.”
    • In essence, genuine economic development, they held, was possible only if Indian capital itself initiated and drove industrialisation.
  • They were equally aware of the political consequences of foreign capital investment, which created vested interests demanding security for investors — and thereby helped perpetuate foreign rule.

Problems Highlighted by the Moderates

• A major problem highlighted by the early nationalists was the progressive decline and ruin of India’s traditional handicrafts, which they attributed to a deliberate policy of stamping out Indian industries in the interests of British manufacturers.
• Pattern of Foreign Trade and Railway Construction: British administrators pointed with pride to the rapid growth of India’s foreign trade and railway network as instruments of India’s development and proof of its growing prosperity.
  • The nationalists, however, argued that because of their negative impact on indigenous industries, foreign trade and railways represented not economic development but colonisation and underdevelopment of the economy.
  • What mattered in foreign trade was not its volume, but its pattern — the nature of the goods exchanged and their impact on national industry and agriculture — a pattern that had shifted drastically during the 19th century, with an overwhelming bias towards the export of raw materials and the import of manufactured goods.
  • Similarly, the nationalists pointed out that railways had not been coordinated with India’s industrial needs — ushering in a commercial, rather than an industrial, revolution, one that enabled imported foreign goods to undersell domestic industrial products.
    • The benefits of railway construction — in encouraging the steel and machine industries and capital investment (what would today be called backward and forward linkages) — had been reaped by Britain, not India.
    • G.V. Joshi argued that expenditure on railways should be seen as an “Indian subsidy to British industries.”
• The Policy of Free Trade: the early nationalists regarded free trade as a major obstacle to rapid industrial development — on one hand, ruining India’s handicraft industries, and on the other, forcing India’s infant and underdeveloped modern industries into premature, unequal, and hence unfair and disastrous competition with the highly organised industries of the West.
  • The Government’s tariff policy convinced nationalists that British economic policy in India was fundamentally guided by the interests of the British capitalist class.
• Pattern of Finance: the early nationalists strongly criticised the colonial pattern of finance, under which taxes were raised in a way that overburdened the poor while allowing the rich — especially foreign capitalists and bureaucrats — to go largely scot-free.
  • They demanded a reduction in land revenue and the abolition of the salt tax, while supporting the imposition of income tax and import duties on goods consumed by the rich and middle classes.
• Pattern of Expenditure: they pointed out that government expenditure emphasised serving Britain’s imperial needs, while developmental and welfare departments remained starved of funds.
  • They condemned the high expenditure on the army, used by the British to conquer and maintain imperialist control over large parts of Asia and Africa.

The Drain Theory as the Focal Point

• The drain theory stood as the focal point of the nationalist critique of colonialism, incorporating all the threads of that critique — since the drain denuded India of the productive capital its agriculture and industries so desperately needed.
  • It represented the high watermark of nationalist leaders’ comprehensive, interrelated economic analysis of the colonial situation, one that made the exploitative character of British rule genuinely visible.
  • The theory also carried great political merit, being easily grasped even by a nation of peasants — no idea could arouse people more powerfully than the thought that they were being taxed so that others, far away, might live in comfort.
  • Modern colonialism was, in this sense, inseparable from the drain: the contradiction between the Indian people and British imperialism came to be seen as insoluble except through the overthrow of British rule — making it inevitable that the drain theory became the main staple of nationalist political agitation during the Gandhian era.

Effects of the Economic Critique

• This agitation over economic issues helped undermine the ideological hegemony of the alien rulers over Indian minds — that is, the foundations of colonial rule in the popular imagination.
  • Any regime remains politically secure only so long as people retain basic faith in its moral purpose and benevolent character — the belief that rulers act primarily in the people’s welfare. This belief provides a regime its legitimacy and moral foundation.
  • The secret of British power in India lay not merely in physical force, but equally in moral force — the belief, carefully cultivated over a century, that the British were the “Mai-Baap” (mother-father) of the common people of India.
    • Indeed, the very first lesson in primary school language textbooks was most often on “the benefits of British rule.”
• The nationalist economic agitation gradually eroded these moral foundations, corroding popular confidence in the benevolent character of British rule — in both its good results and its good intentions.
  • Economic development had been offered by imperial spokesmen as the chief justification for British rule; Indian nationalists forcefully contested this, asserting that India remained economically backward precisely because the British ruled it in the interests of British trade, industry, and capital — with poverty and backwardness as the inevitable consequences of colonial rule.
• This corrosion of faith in British rule inevitably spread into the political field.
  • Nationalist leaders linked nearly every economic question to India’s politically subordinated status, gradually concluding that pro-Indian, developmental policies could only follow from a regime in which Indians themselves controlled political power.
  • As a result, even though most early nationalist leaders were moderate in politics and methods — many still professing loyalty to British rule — they nonetheless cut at the political roots of the empire, sowing seeds of disaffection, disloyalty, and even sedition.
    • This was one of the major reasons why 1875 to 1905 became a period of intellectual unrest and spreading national consciousness — the seed-time of the modern Indian national movement.
  • While Indian nationalists confined their political demands, until the end of the 19th century, to a share in political power and control over the purse, by 1905, most prominent nationalists were demanding some form of self-government.
    • Dadabhai Naoroji was again the most advanced on this front:
      • speaking on the drain at the International Socialist Congress (1904), he demanded “self-government” and treatment of India “like other British Colonies”;
      • at the 1905 Benares session of the Indian National Congress, he categorically asserted that “self-government is the only remedy for India’s woes and wrongs”; and
      • as President of the 1906 Calcutta session of Congress, he set the national movement’s goal as “self-government or Swaraj,” on par with that of the United Kingdom or its Colonies.
• The early nationalists thus rooted their nationalism in a brilliant, scientific analysis of the complex economic mechanisms of modern colonialism, and of the chief contradiction between the interests of the Indian people and British rule.
  • The 20th-century nationalists relied heavily on these central themes of the economic critique of colonialism.
  • Built on this firm foundation, later nationalists went on to stage powerful mass agitations and movements — and, precisely because of this grounding, they did not waver in their anti-imperialism, unlike movements in China, Egypt, and many other colonial and semi-colonial countries.

Note: Contested Estimates of Per Capita Income

• Naoroji calculated the per capita income of Indians at Rs 20, while Digby’s calculation was Rs 18 for 1899.
  • The government disputed these figures: in 1882, Ripon’s finance secretary calculated it at Rs 27, while Lord Curzon, in 1901, calculated it at Rs 30.
  • The famines and epidemics of this period, however, told a rather different story.

Economic Demands of the Moderates

• To address the situation, the Moderates demanded a fundamental change in economic policy. Their recommendations included:
  • reduction of expenditure and taxes;
  • a reallocation of military charges;
  • a protectionist policy to shield Indian industries;
  • reduction of land revenue assessment;
  • extension of Permanent Settlement to the ryotwari and mahalwari areas; and
  • encouragement of cottage industries and handicrafts.
• None of these demands were fulfilled.
  • Income tax, abolished in the 1870s, was reimposed in 1886.
  • The salt tax was raised from Rs 2 to Rs 2.5.
  • A customs duty was imposed, but matched by a countervailing excise duty on Indian cotton yarn in 1894, later reduced to 3.5 per cent in 1896.
  • The Fowler Commission artificially fixed the exchange rate of the rupee at a high rate of 1 shilling and 4 pence.
  • There was no fundamental change in the agricultural sector either, as colonial experts like Alfred Lyall believed Indian agriculture had already passed through its stationary stage and entered a modern stage of growth — seeing more signs of progress than recession.
• The moderate economic agenda, like its constitutional and administrative counterpart, thus remained largely unrealised.